GBP/USD extends the decline (video)
By Kira Iukhtenko, FBS
Cable stayed under bearish pressure on the past week, but slowed the pace of decline. At the beginning of the week the price attempted to recover, inspired by the upbeat service and construction PMIs and rising house prices. However, it’s all not so bright in the UK economy: manufacturing growth is slowing and wage growth remains subdued. Buyers faced resistance at $1.6880 and stepped aside for now. As expected, the Bank of England left monetary policy unchanged on Thursday. Cable resumed the decline then, hitting the lowest level since June on Friday.
Bank of England is now in a very important phase of defining the terms of rate hikes. August meeting didn’t bring any news, but there have clearly been hot discussions inside of the MPC. We’ll know all the details from the policy minutes on Aug. 20. Next week (Aug. 11 – 17) will also be important in terms of the UK economic calendar.
Technically, GBP/USD picture remains bearish below the $1.7000 mark. Fix below the $1.6800 support will open the way to $1.6700/6690 - this is a safe selling opportunity. Daily Ichimoku is also giving out negative signals. Break below $1.6690 could confirm a top. However, pay attention to the inverted hammer formation on the weekly chart. The pair is now oversold, so we concede a short-term recovery at the beginning of the next week. Resistance lies at $1.6880, $1.6950 and $1.7000.